BAKU, Azerbaijan, June 1. The Western Balkans have made significant strides since embarking on economic transition in the mid-1990s, but key structural challenges remain, said Matteo Colangeli, Regional Director of the European Bank for Reconstruction and Development (EBRD) for the Western Balkans, in an exclusive interview with Trend.
Colangeli noted that the region experienced rapid growth until the global financial crisis of 2008–2009. "Economic convergence has slowed since then due to slower productivity growth," he explained. However, employment and wages have increased, allowing for improvement in living standards.
Foreign direct investment (FDI) has played a critical role in supporting these developments, with strong inflows across much of the region. Still, Colangeli emphasized the importance of deepening local integration into the global economy. "Supporting domestic companies to become suppliers in global value chains is the way forward to increase the domestic value added of exports," he said.
Despite the progress, Colangeli underlined that there are still large transition gaps remaining in the region, particularly in the governance of state-owned enterprises (SOEs). "Corporate governance of state-owned enterprises needs to be enhanced to reduce political influence and improve their economic performance," he said.
The EBRD official also highlighted the urgent need to decarbonize the region’s energy systems. "Greening electricity generation is essential," he stressed, noting this shift would help lower the financial burden of the EU’s incoming Carbon Border Adjustment Mechanism and also reduce air pollution. "Air pollution causes tens of thousands of excess mortality in the region annually," he warned.
Another area requiring attention is energy efficiency. "Energy intensity - the energy used to produce one unit of GDP - is about three times the EU average," Colangeli said, urging that improving efficiency must remain a priority.
Labour market reform is also critical in light of demographic trends. "More inclusive labour market policies, focusing on women, youth, and disadvantaged groups, are all the more important as labour markets are becoming tighter due to demographic decline and continuing emigration of the population," he concluded.
